Frequently Asked Questions Pay Transparency Regulations

On September 11, 2015, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published a Final Rule revising the regulations implementing Executive Order 11246, as amended at 41 CFR Part 60&hyphen;1 to protect employees who inquire about compensation from discrimination. More specifically, the regulations prohibit federal contractors and subcontractors from discharging or otherwise discriminating against their employees and job applicants for discussing, disclosing, or inquiring about compensation. The regulations became effective on January 11, 2016, and apply to all covered contracts entered into or modified as of that date. Additional information about the regulations is provided in the following Frequently Asked Questions.

General Information

1. How do I know whether an employer is a federal contractor subject to the pay transparency regulations?

If a business or organization has a Federal contract, subcontract, or federally&hyphen;assisted construction contract it may be subject to the requirements of Executive Order 11246. Generally speaking, any business or organization that (1) holds a single federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has federal contracts or subcontracts that have a combined total in excess of $10,000 in any 12&hyphen;month period; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount will be subject to the requirements of Executive Order 11246.

3. Which employee activities are protected by the pay transparency regulations?

The regulations protect an applicant or employee’s inquiries, discussions, and disclosures regarding his or her own compensation, or the compensation of another applicant or employee. This protection would typically apply where the applicant or employee obtains this information through ordinary means, such as conversations with co&hyphen;workers or an anonymous note from a co&hyphen;worker.

4. Which employee activities are not protected by the pay transparency regulations?

There are two broad categories of inquiries, discussions, or disclosures that may not be protected.

First, inquiries, discussions, or disclosures of compensation information that employees obtain through their "essential job functions" are not protected. Information is obtained as a part of an employee’s "essential job functions" if:

access to compensation information is necessary to perform that function or another routinely assigned business task, or

the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.

However, employees with such essential job functions are protected by the regulations to the extent that they (a) discuss their own compensation with other employees or (b) discuss possible disparities involving another employee’s compensation with a management official or while using the contractor’s internal complaint process. Additionally, even if an employee has access to compensation information as part of her essential job functions, she may disclose or discuss the compensation of applicants or employees in response to a formal complaint or charge, investigation, proceeding, hearing or action. Further, these employees are protected by the pay transparency regulations to the extent that they disclose or discuss the compensation of other applicants or employees based on information received through means other than essential job functions access.

Second, these regulations provide a defense for contractors in the event that compensation inquiries are made while violating a consistently and uniformly applied workplace rule, so long as that rule doesn’t generally prohibit compensation disclosures. For example, an employer may have a rule that prohibits employees from being disruptive in the workplace. An employee may violate that rule by standing on his desk and repeatedly and disruptively shouting out his pay. In this case, the employee may be disciplined for those actions, if he were disciplined for being disruptive and not for disclosing his pay, as long as the employer consistently and uniformly applied the workplace rule.

5. How do the employee protections in the pay transparency regulations differ from protections under the National Labor Relations Act (NLRA)?

Although both the NLRA and the pay transparency regulations prohibit contractors from discriminating against employees and job applicants who discuss or disclose their own compensation or the compensation of other employees or applicants, there are differences in the extent of the protections. Unlike the NLRA, the pay transparency regulations extend protections to supervisors, managers, agricultural workers, and employees of rail and air carriers.

You must file your complaint within 180 days from the date of the alleged discrimination, unless the filing date is extended for a good cause shown. Some examples of what might be good cause include the existence of some extraordinary circumstance that prohibited you from filing before the deadline such as a significant health issue, military deployment, incarceration, or possibly being unaware of the discrimination. In addition, you must remember to sign your completed complaint form. If you fail to do so, OFCCP will still take your complaint but an OFCCP investigator will ask you to sign the form during a follow&hyphen;up interview.

Overview of the Pay Transparency Regulations

1. Do the pay transparency regulations prohibit contractors from having formal and informal pay secrecy policies?

Yes. Contractors are prohibited from having polices that prohibit or tend to restrict employees or applicants from discussing or disclosing their compensation or the compensation of others. Therefore, if a contractor has a policy that prohibits employees from talking to each other about end&hyphen;of&hyphen;the&hyphen;year bonuses, it would be considered a discriminatory action, as it prohibits employees from discussing their compensation.

2. Does the definition of "compensation" in the pay transparency regulations only include an employee’s paycheck or salary?

No. These regulations include a broad definition of "compensation," encompassing more than an employee’s paycheck or salary. The definition of "compensation," which extends to employees and applicants, includes, but is not limited to, salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing, and retirement.

"Compensation information" refers to the amount and type of compensation provided to employees or offered to applicants. Examples of "compensation information" include the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity; the availability of employees with like skills in the marketplace; market research about the worth of similar jobs in the relevant marketplace; job analyses, descriptions, and evaluations; salary and pay structures; salary surveys; labor union agreements; and contractor decisions, statements and policies related to setting or altering employee compensation.

4. Does the definition of "essential job functions" in the pay transparency regulations differ from the definition under the Americans with Disabilities Act, as amended (ADA)?

Yes. The definition of "essential job functions" in the pay transparency regulations is different from the ADA in that it emphasizes access to and the use of compensation data, whereas the ADA focuses on the general duties and uniqueness of a position. The pay transparency regulations use categories or factors to determine whether a job or job function falls under the definition of "essential job functions." These categories are: (1) the access to compensation information is necessary in order to perform that function or another routinely assigned business task; or (2) the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.

6. What is the general, or "workplace rule," defense to alleged violations?

The general defense allows contractors to pursue a defense to alleged violations so long as that defense is not based on a rule or policy that prohibits employees or applicants from discussing or disclosing compensation information. This defense could apply, for example, in situations where a contractor disciplines an employee for a violation of a consistently and uniformly applied workplace rule.

7. What is an example of when a federal contractor might raise the general, or "workplace rule," defense?

A federal contractor might have a rule to give verbal warnings to employees who exceed their allotted break time one time by five minutes. For the contractor to act in a uniform manner, it would apply the same corrective action — here, a verbal warning — to employees who exceed their allotted break time once by five minutes, including any employees who may have been discussing compensation. The fact that the employees were discussing compensation should not impact the severity of the discipline they receive pursuant to the workplace rule. The pay transparency regulations require that contractors uniformly apply workplace rules to similarly situated employees, regardless of their protected activity, to prevent contractors from using the rule as a way to avoid liability for discrimination.

8. What is the "essential job functions" defense to alleged violations?

The "essential job functions" defense provides contractors with a defense for alleged violations when an employee (a) as part of that employee’s essential job functions has access to the compensation information of other employees or applicants and (b) discloses such compensation information to individuals who do not otherwise have access to it.

9. What is an example of a job or job function that meets the definition of "essential job functions" under the pay transparency regulations?

The position of a human resource manager who has access to the sensitive compensation information of others within an organization is an example of a job that would fall under the definition of "essential job functions" in the pay transparency regulations. In this particular example, a human resource manager is authorized access to compensation information to perform routinely assigned business tasks. A human resource manager may also have a duty to protect this type of information from disclosure. Therefore, a human resource manager who discloses or discusses the compensation of applicants or employees, based on information that the manager obtained through the performance of his or her job, is not protected under the pay transparency regulations.

In contrast, a janitor’s job functions would not meet the definition of "essential job functions" in the pay transparency regulations. If the primary purpose of the janitor’s position is to clean (i.e., sweep, dust, vacuum), doing so does not require the janitor to access confidential compensation information. Similarly, merely cleaning does not require the janitor to maintain the privacy of personnel records. Finally, janitors are not typically authorized to access compensation information. The contact with the compensation information must be more than incidental; therefore, if the janitor discloses or discusses the compensation of applicants or employees, the janitor’s actions would be protected under pay transparency regulations.

10. May an employee discuss or disclose a potential pay discrepancy discovered during the performance of her essential job functions?

An employee who has access to compensation information as part of her essential job functions has a duty to protect such information from disclosure. However, this duty does not preclude the employee from pursuing a compensation discrimination claim, responding to a formal complaint or investigation, or raising potential pay disparities involving the compensation of other employees to a management official with the contractor or while using the contractor’s internal complaint process. The employee would also not be prohibited from sharing his or her own compensation with others, even if the employee does not believe he or she is being discriminated against.

11. How will OFCCP analyze an allegation of discrimination under the pay transparency regulations to determine whether a violation has occurred?

Both Executive Order 11246, as amended, and the pay transparency regulations prohibit discrimination against any employee or applicant. Therefore, OFCCP will use the causation frameworks that are available in discrimination cases — including the "motivating factor" framework. Under the motivating factor framework, where the contractor has a lawful reason for its action, OFCCP would have to determine that the improper reason, i.e., disclosure or discussion of compensation by the applicant or employee, was a motivating factor for the adverse action even if a lawful reason also motivated the adverse action. Under this framework, the contractor cannot defeat liability once the existence of an impermissible motivating factor has been established. However, if the contractor can demonstrate that it would have taken the same action in the absence of the impermissible motivating factor, it would not be required to provide monetary relief and certain injunctive relief.

Although the motivating factor framework is a permissible approach, it is not the only approach OFCCP may use to analyze allegations of discrimination. OFCCP has the discretion to determine the approach it will take on a case–by–case basis. For example:

In "mixed motive" cases — where, for instance, the employer can show that it fired an employee in part for taking excessive breaks, but where there is also evidence that the employer fired the employee in part for discussing compensation — the motivating factor approach would be appropriate.

In "single motive" cases — where, for instance, the employer claims that it fired an employee for taking excessive breaks but the evidence shows that this is demonstrably false — OFCCP may opt to proceed under the more traditional "determinative factor" or "pretext" approach.

OFCCP may also analyze a case via both frameworks, finding, for instance, that discrimination was the determinative factor in an employer’s adverse action but, in the alternative, that it was a motivating factor.

12. Why do the pay transparency regulations use a discrimination framework, rather than a retaliation framework?

The pay transparency regulations use a discrimination framework rather than a retaliation framework for a number of reasons. First, the pay transparency protection afforded by Executive Order 11246, as amended, differs from the traditional Title VII retaliation framework. While Title VII retaliation claims currently require either opposition to an unlawful employment practice or participation in a formal investigation, the pay transparency protection in Executive Order 11246 protects any compensation inquiries, discussions, or disclosures. Additionally, the pay transparency protections in Executive Order 11246 are inherently and uniquely connected to discrimination claims. The Order’s protections are geared not only to safeguard the integrity of existing pay discrimination laws, but also to allow workers to discover discrimination that would otherwise be hidden. This protection is also interrelated with contractors’ existing and ongoing affirmative action obligations to evaluate and report on their compensation systems for the existence of potentially discriminatory disparities.

Finally, there is a close relationship between the activity protected by Executive Order 11246, as amended, and the National Labor Relations Act, which also permits a "motivating factor" analysis. Many claims would be actionable under both laws, and thus maintaining a uniform standard of analysis, to the extent possible, should minimize confusion for all parties.

13. Do federal contracting agencies have to alter the Equal Opportunity Clause as a result of the changes to Executive Order 11246?

Yes. Under Executive Order 11246 and its implementing regulations, federal contracting agencies must include in federal contracts a provision prohibiting contractors from discharging, or in any manner discriminating against, any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. Federal contractors must also include such a provision in subcontracts.

Yes. Contractors may continue citing to 41 CFR 60&hyphen;1.4, the equal opportunity clause provision of the regulations, to incorporate by reference the Executive Order 11246 equal opportunity clause into their contracts and subcontracts.

15. Do the pay transparency regulations require employers who are federal contractors to disclose what they pay their employees?

No. The pay transparency regulations do not require contractors to make any additional disclosures about what they pay their employees. Covered contractors are only prohibited from discharging, or in any other manner discriminating against, any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed their own compensation or the compensation of others, subject to the defenses in the rule.

18. Will the "EEO is the Law" poster be revised in light of the pay transparency regulations?

OFCCP is currently working with the Equal Employment Opportunity Commission (EEOC) to update the "EEO is the Law" poster in light of regulatory changes. While OFCCP works with EEOC to revise the poster, contractors should continue using the existing poster. OFCCP will post a notice on its Web site to let contractors know when the new poster is available for use. In the interim, OFCCP has a supplement or insert for contractors to use along with the current poster that will reflect all regulatory changes. View the supplement.

21. May the nondiscrimination provision language be altered when incorporating it into manuals or handbooks, or when posting it for applicants?

Because OFCCP believes that uniform use of the nondiscrimination provision is necessary to ensure consistency and clarity in the information provided to applicants and employees, contractors must, at a minimum, use the nondiscrimination provision provided on the OFCCP Web site. Of course, nothing in the pay transparency regulations limits a contractor from providing additional information to their employees about their rights and obligations.

22. Do the pay transparency regulations require a posting requirement, separate from the "EEO is the Law" poster?

Yes. In addition to the "EEO is the Law" poster, contractors must also disseminate the nondiscrimination provision by either electronic posting or by posting a copy of the provision in conspicuous places available to employees and applicants for employment. The nondiscrimination provision is prescribed by the Director of OFCCP.

23. Do the pay transparency regulations impose a training requirement?

No. The regulations do not require contractors to modify their existing trainings or meetings to include a review of the pay transparency protection. Although the regulations do not require training, contractors may incorporate training on pay transparency.

24. Do the pay transparency regulations prohibit contractors from having policies designed to protect proprietary business information or trade secrets?

Although contractors are generally prohibited from discriminating against applicants or employees for discussing or disclosing compensation, a company policy that is narrowly tailored to prohibit disclosure of specific proprietary business information or trade secrets, or that is otherwise designed to be consistent with federal or state privacy laws, could fall within the general "workplace rule" defense already set forth in the rule.

Technical Assistance and Public Education

1. What steps has OFCCP taken to educate the public on the pay transparency protections in Executive Order 11246 (e.g., workshops, webinars, and the issuance of other guidance materials)?

OFCCP has published compliance assistance materials such as fact sheets and "Frequently Asked Questions" and hosted webinars on the requirements. OFCCP has also conducted workshops and forums to listen to any questions and concerns contractors and other stakeholders have about the requirements of the pay transparency regulations. As with the implementation of its other regulations, OFCCP is committed to engaging its stakeholders with the goals of providing access to information, identifying and addressing issues that might hinder a successful implementation, and providing compliance assistance to contractors. OFCCP will publish additional technical assistance materials, as appropriate.

3. What should I do if I have a question that is not answered by OFCCP’s regulations or other materials?

Contractors and other stakeholders may always reach out to OFCCP’s Customer Service Desk at 1–800–397–6251, or by going to the "Contact" tab on the OFCCP Web site at https://www.dol.gov/ofccp/ to email us.